TTIN Digest
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23 April 2023Sensex: 59,655.06 ▼ 1.28% |
Some brands are so big, they’re a part of the culture. Few brands can rival Walmart in that regard. America is deeply reliant on Walmart. 90% of the population of the USA lives within 10 miles of a Walmart store. That’s how integrated Walmart is in the average American’s life. Walmart has the highest revenues in the world – over $600 billion. It employs over 2.3 million people – it is the world’s biggest private employer. So busy are its executives, they actually have 22 private jets to take their executives to different locations. Walmart has been growing steadily for decades now. It is a money-printing machine. Riding on the momentum, Walmart decided to venture into other countries a few decades ago. They had deep insights into the psyche of their customers and employees. Over the years, they had mastered the art of selling so well, it was almost a formula. They’d repeat this formula again and again, every time a new store opened up. And it worked – every time. The staff was friendly and greeted customers with a smile. Their polite demeanor ensured the customers felt cared for. The cashier would also pack the purchased items in plastic bags for the customers. At the billing counter, the cashier would casually talk to customers about how their experience at the store was, and how their day was going overall. Many times, you wouldn’t need to ask for help, someone would notice you in the long rows and walk up to help you. Walmart employed lots of people at minimum wage – the least possible payable salary. This allowed them to offer products at exceedingly low prices on already cheap products. These were everyday items that were already cheap. This killed off competition from local stores – they died out wherever a Walmart store opened. To keep employees in the right spirits, there was a mandatory morning exercise routine during which, many times they’d also shout enthusiastically, “Walmart!” – it was part of the morning routine. They kept a close eye on employee behavior. Politics wasn’t allowed. Employees were encouraged to report other employees’ behavior which included details about them dating co-workers. Unions weren’t allowed to exercise power in the workplace. Whatever it was, it worked. Walmart Expands Abroad It worked, so they decided to make it work elsewhere too. Walmart spread itself into Canada – which is right above America and shares a lot of its culture. It also expanded below itself – into Mexico. And, it decided to step into Europe – via Germany. The ‘Western world’ is often grouped for being culturally similar. North American countries, European countries, and a few other countries like Australia and New Zealand are all called ‘Western’ cultures. Walmart was not really venturing out of the Western world by going to Germany. In 1998, the first Walmart opened in Germany. Its executives were looking to repeat the same formula that had worked so well in America. The same policies were implemented. Smiling employees who greeted customers with a smile, packed their items, and even made small conversation. Low salaries. Offered cut-throat pricing. The mandatory morning exercise routine. Employees closely tracked. Unions not entertained. The exact formula. Walmart vs Germany Almost immediately, there was a problem. The Germans, although ‘Western’, are actually very different from Americans. They’re very direct. They also don’t speak much unless necessary. The very extroverted and friendly behavior of the employees at Walmart actually creeped the German customers. They felt the cashiers and other staff were too intrusive. Even the plastic bags being packed by the cashiers was seen as some kind of a line being crossed. In fact, plastic bags themselves were a red flag – it seems Germans cared about the environment a lot more than Americans. German laws prevented sellers from pricing items too low. In their minds, it meant that the company was being unfairly competitive. So Walmart had to raise prices. Another advantage gone. While Walmart had used its American formula in Germany, the staff working there were still locals – they were Germans. They absolutely hated the morning exercise routine, especially with the chanting of “Walmart!”. The employees weren’t particularly happy with their employer. In addition, the Germans are more guarded about their personal lives. Walmart asking them to keep an eye on each other to reduce ‘politics’ and ‘office romance’ was not well-received. Employees regularly left and new ones joined. Attrition was poor. Unions were not tolerated. But in Germany, unions form a very natural part of an employee’s interaction with his/her employer. Each of these sore points individually gave a bad name to Walmart in Germany. Employees and ex-employees didn’t have nice things to say about the company. Customers felt creeped out by the shopping experience. Nobody seemed to walk away happy from Walmart. The excellent formula for success was not working in Germany. The company tried various measures to revive. Eventually, they sold their assets in Germany for a loss and left. In 2006, Walmart exited after losing over $1 billion. Formulas This is the problem with formulas. If one formula works somewhere, many assume it’ll work everywhere. Investors must never forget, what works at one place might not work at another. Choosing a mutual fund based on low expense ratios might be a good strategy when choosing between index funds. The same might not work when choosing small-cap mutual funds. PE ratio might be useful for judging if a stock is overvalued. But it won't be as effective in the case of banking sector stocks. There, the PB ratio might be more useful. Looking at dividends to decide if you want to buy a stock might be a good strategy for some large-cap companies. The same might not work for high-growth small and mid-cap stocks. The point of it all is – formulas exist because they work. But they work in some environments. And they stop working outside of those environments. When an investor has a formula that seems to work well, he/she must also spend time trying to understand the limits of the formula.
+State-run oil companies (Indian Oil, BPCL, Oil India, GAIL) spent Rs 1.14 lakh cr in capital expenditure in 2022-23: Oil Ministry data. +Active domestic LPG consumers have increased from 14.52 cr in April 2014 to 31.36 cr as of March 2023. +Rs 1.01 lakh cr of GST evasion was detected by tax officers between April 2022 - March 2023, nearly 2 times compared to the last year. +SGX Nifty will get delisted from the Singapore Exchange. It will be relisted as ‘NSE IFSC Nifty’ from July 3. +Domestic crude oil production fell 1.7% in 2022-23. The consumption of petroleum products rose 10.2% in the same period: Oil Ministry. +India now has the highest population in the world: UN report. +The Indian government has reimposed windfall tax on domestically produced crude oil at Rs 6,400 per tonne. Export duty on diesel has been removed. +India’s gems and jewellery exports rose 2.48% year-on-year in 2022-23 to Rs 3 lakh cr: Gem & Jewellery Export Council. +Mankind Pharma has fixed price band for its IPO at Rs 1,026 to Rs 1,080 per share. The IPO will open on April 25. +Government-owned steel companies have cleared loans of around Rs 7,673.95 cr from various MSMEs during Financial Year 2023: Steel Ministry. +Indian Railways earned revenue of Rs 2.4 lakh cr during April 2022 - March 2023 (financial year), up by around Rs 49,000 cr. +Air traffic in India stood at 1.29 cr in March, highest in 3 years: DGCA. IndiGo had a market share of 56.8%, Tata Group = 25.3%, GoFirst = 6.9%, SpiceJet = 6.4%, Akasa Air = 3.3%. +Avalon Tech IPO listed at Rs 431 per share on BSE, a discount of 1.15%. On NSE, it listed flat at Rs 436. +Wholesale inflation in India (WPI) fell to a 29-month low of 1.34% in March vs 3.85% in Feb. +Passenger vehicle exports from India rose 15% between April 2022-March 2023 (FY23). Total passenger vehicle exports stood at 6.63 lakh units. Maruti exported the highest number of vehicles - 2.5 lakh: SIAM. Groww Digest on Telegram: Click here to subscribe.
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